Alright, so to the calculation. There’s a few main variables I’m going to focus on here in Phoenix:
Vacancy: By vacancy I don’t mean actual. I mean effective vacancy. I’m talking effective vacancy because that’s the average vacancy you can expect over a year. SO even if you have a turnover and the unit is down for a month, that counts. I suggest 10% if you’ve got a more typical property and area, but use your own judgement.
Maintenance: The most fudged number in real estate. I’ve found maybe 5 properties for sale with a realistic maintenance level. Again, it’s really effective maintenance. How much is it going to be to keep the place nice and pretty?
Utilities: IF you’re buying a half empty place, then don’t be that guy who puts the current utility bill into a place you’re filling up. It’ll likely come around double in expense if you double your tenants wouldn’t it? Just think that one through.
In reality, this is all simple stuff. The real hard part is keeping it that way. If you really like a property you may feel like fudging the numbers a bit….DON’T!